Analyzing the Overall Market For Dummies
Posted by Blain Reinkensmeyer
August 24, 2007 at 12:59 am
There are a multitude of different ways to get a basic or in depth read of what the market overall has been up to. When speaking of the market as a whole you usually refer to one the major market indices such as the S&P 500 or the NASDAQ Composite. This post will utilize the S&P 500 and apply a basic tactic of utilizing a stock chart and volume.
Look at a Chart, Use Simple Volume Interpretation
Applying the lessons covered in understanding volume, we can take a quick look at chart of the S&P 500 and pull some simple conclusions as to where the market is as whole.
This stock chart may look complex, but lets look at this from a simple perspective and observe some trends the market has had here in 2007:
- From mid March all the way until June the market was in a strong uptrend
- From June until mid July the market was flat
- From mid July until now the market has been in a steeper downtrend
If we look at the most recent movement of say the last three days, we can see that volume has been well below average. As a result, do you think the move taking the S&P 500 back above 1460 is credible, or will the downtrend continue? Furthermore, what seems like a better time to buy, during an uptrend like the one earlier this year or during the downtrend we are currently in now?
Setting up a stock chart to perform this simple technical analysis is actually quite easy. There are a few places to gain access to free stock charts: stockcharts.com, yahoo finance, google finance, and bigcharts.com are just a few. All it takes is a few seconds to open up one these websites, click to view a chart of the S&P 500, get to a year view, and compare the volume to recent price movement. Done deal.
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What i also do is that I check stocks that are on my watch list and that dropped more than the market (i.e by 20% if the overall market loss is 8-10%). I assume that these stocks have been penalized by way too much and they should eventually jump along with the market.I guess we can call that “betting on the beta” ?
According to me, the stocks which fall 20% or more as compared to overall stock market fall of 8 to 10%, are more volatile and speculative stock, so it does not mean if the stock market start to rally, these stocks will jump along with stock market, but instead chances are more these stocks can go more deeper and only the very good quality stock will jump along the stock market.
Ya I would be careful with that, every situation is really different. I would more so compare it to its own industry and what its competitors have been doing performance wise.
I agree but banks for example dropped more than 10% since their highest spot price back in April-May. They are usually not highly speculated stocks.
[...] Analyzing the Overall Market for Dummies [...]
[...] Analyzing the Overall Market For Dummies [...]
[...] a quick read of my post on analyzing the overall market for dummies and you can see based on the chart below how we are entering what could be considered a [...]
[...] The big question is whether or not this rebound is going to stick and truly signal a market ready to continue its move forward. Attached are charts of both the S & P 500 and the NASDAQ Composite. (Need help? Check out our stock chart education and reading the overall market for dummies) [...]